Wednesday, May 11, 2011

Ontario’s Power Trip: The end of FIT

Ontario’s Power Trip: The end of FIT
By Parker Gallant

After being challenged by the Ontario Liberals for the past six months to “show us your plan,” Tim Hudak, leader of the Ontario Conservative party, did just that on Tuesday. In a speech that outlined what could well become the defining issue of the coming Ontario election, Mr. Hudak promised to take down the key elements of Premier Dalton McGuinty’s green energy program.

The Green Energy Act is rightly billed as the most aggressive legislation of its kind in North America. Modelled after programs in Europe, it established Ontario as a pioneer feed-in-tariff jurisdiction, promising solar and wind power operators massive subsidies of up to 80¢ a kilowatt hour. The McGuinty Liberals also signed an industrial development agreement with Samsung, the giant Korean conglomerate, to produce and install solar and wind equipment in Ontario.

In a speech to energy industry executives at their annual Ontario Power Summit in Toronto, Mr. Hudak promised to gut what the Liberals created over the past seven years, a government-controlled electricity industry marred by constant political meddling. Mr. Hudak promised to end “the daily political interference that emanates from Queen’s Park,” home of the Ontario legislature. He focused on how he will “put families first,” “use a competitive, transparent approach to our diverse supply mix and put an end to sweetheart deals.” Finally he promised to “treat energy as economic policy,” a turnaround for a province where energy has been treated as a green policy by the McGuinty government.

Two sentences stand out in Mr. Hudak’s speech. “Let me be clear. An Ontario PC government will end the sweetheart Samsung deal.” The Samsung deal is largely a secret agreement whereby Samsung would install 2,000 megawatts of wind power and 500 MW of solar power. The company would also build plants in Ontario to produce components for solar and wind projects. The value of the investment was publicly said to be $7-billion.

The second standout sentence targeted the feed-in-tariff regime: “Also, we will end the FIT program.”

Ending the FIT program is one way to slow the growth rate in consumer bills. To replace the FIT program, which gave industry 20-year fixed prices for generation, Mr. Hudak promised to create a bidding process for all future energy contracts, allowing all the players in the sector to compete. Since the price of green energy is supposedly coming down, competitive bidding should accelerate that trend. Existing contracts would be honoured, Mr. Hudak said.

As for the Samsung contract, Mr. Hudak pointed out that the McGuinty Liberals signed the deal without seeking competitive bids from other firms and without providing any information to Ontario taxpayers.

With this speech, Mr. Hudak has certainly set up electricity and the McGuinty government’s green energy program as dominant issues for the October provincial election. He clearly is willing to risk antagonizing industry players in wind and solar, along with the green NGO community.

On the other hand, Mr. Hudak will find allies among consumers, business consumers of electricity and many ­local governments. Mr. Hudak promised to revisit what many consider one of the most offensive parts of the Green Energy Act, provisions that took away local decision-making powers. These provisions would be tossed out, he said, allowing local municipalities to decide if they wanted industrial wind or solar or other generating installations — hot-button issues across rural Ontario.

Wind and solar “can complement a 21st century economy, but they cannot power it,” said Mr. Hudak, adding that “Ontario has been well served by hydroelectricity and nuclear power.”

He promised the audience that he would work with them to set out a “long-term policy framework and then leave it to the sector … to implement and execute.” There would be “no more day-to-day directives that hinder long-term objectives.” That was a direct swipe at the Liberals’ constant revisions to electricity policy, especially their killing of an integrated power plan that had been years in the making. Spiking the plan triggered the departure of Jan Carr as head of the Ontario Power Authority and his replacement by Colin Andersen in 2008.

Mr. Hudak promised to dismember the Ontario Power Authority, which has grown to a 300-person “big bureaucracy” under the Liberals. It also looks as though Mr. Hudak would re-establish the role of the Ontario Energy Board as an arm’s length entity that would balance consumer and power-sector needs. This might have the beneficial effect of putting the brakes on the spending habits of the provincially owned Hydro One and Ontario Power Generation, whose costs have continued to grow while their output remains flat.

An Ontario election is five months away. With this speech, I’d say Mr. ­Hudak has laid out a platform plank that has the potential to change the future for Ontario’s electricity industries, and change the province’s political course.

Financial Post

Parker Gallant is a former banker who didn’t like what he was seeing in his Ontario electricity bills. His series, Ontario’s Power Trip, can be reviewed here.

1 comment:

  1. The global recession was hard on economies around the world. Ontario worked with people when others would have cut them loose. The economy is back on track. Ontario jobs are coming back and growth is returning. See the progress report here:


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